Jefferson Parish government is on the hook to pay back $54 million in community disaster loans it borrowed from FEMA after Hurricane Katrina, even though federal officials had implied the debt would likely be forgiven.

View full sizeSusan Poag,The Times-Picayune archiveWorkers were photographed removing the Hurricane Katrina-damaged roof from a warehouse at the Jefferson Parish public school system's administration facility on River Road in Marrero in March 2009. A combination of FEMA and insurance money covered the cost.

Theriot’s administration is not alone. The Sheriff’s Office must reimburse FEMA $6.7 million in loans and interest, said Paul Rivera, the sheriff’s chief financial officer.

Taxpayers will have to pay back the money, officials said. And it’s due, in full, at the end of the year, unless local agencies successfully appeal FEMA’s decisions or negotiate viable payment schedules.

With the economy backsliding and sales tax collections dwindling, “those payments are coming due at the absolute worst time for Jefferson Parish,” Rivera said.

As the sweltering days after the 2005 storm stretched into weeks, Jefferson Parish was one of the first areas with open stores as families and businesses returned to rebuild. The near monopoly on building supplies translated into spikes in sales tax revenue used to run government agencies.

Still, the damage suffered during Katrina qualified the government for $66 million in community disaster loans. Likewise, the Sheriff’s Office qualified for $22 million, although the agency borrowed less than a third of that.

In January, Vice President Joe Biden indicated that the federal government was willing to forgive $705 million it had loaned to the New Orleans area.

“Vice President Biden, when he came into town, mentioned that those loans would be forgiven. But then, like everything else, there’s a catch to the forgiveness of those loans,” Theriot said Wednesday.

Now Jefferson Parish and law enforcement officials are arguing that the temporary prosperity of the building boom following Katrina has come back to haunt them.

At issue now are FEMA’s rules for loan forgiveness. According to federal law, FEMA can cancel a debt if a local government can show it didn’t collect enough money for its operating budget during the three years following a disaster. The Jefferson Parish school system, for example, had $17 million it borrowed — the full extent of its loan — forgiven under that criteria, spokeswoman Beth Branley said.

For example, FEMA excluded any drainage improvements made to prevent costs during future storms, she said, adding that conservative budgeting had led the Finance Department to treat the upswings in sales tax collection as one-time windfalls to counter one-time expenses: construction.

Also, FEMA didn’t count debt payments made on the parish’s two government buildings as part of the administration’s operating budget.

“Without those buildings, how can I operate?” Bolotte asked, calling the uniform nature of FEMA’s guidelines as they apply to all government agencies “ludicrous.”

Parish officials are pushing for FEMA to extend its consideration to the operating budgets of the last five years since Katrina, which would incorporate the full life of the loans and include the economic down-swing of 2009 in its calculations. “The parish can appeal, and has 60 days from when they received notification of the status of their loans,” FEMA spokesman Brad Carroll said. Bolotte said she is meeting with a FEMA consultant today to discuss the parish’s options.

Rivera said the Sheriff’s Office has been doubly penalized. Not only did sales taxes temporarily rise during the three-year period FEMA designated, but the department also lost 350 employees who didn’t return after Katrina. Higher revenue and lower payroll sank the department’s chances to qualify for loan forgiveness, he said.

Then expenses began to rise. To entice new recruits, the office increased starting salaries. It took two years to return to full staffing, Rivera said. A higher payroll coupled with the steep drop-off in consumers’ buying habits have made difficult the department’s ability to pay back the loan, he said.

Rivera said the Sheriff’s Office will apply for a five-year extension while it appeals FEMA’s ruling.